The Fall of the Liberty Dollar and the Rise of the Goldback: A Legal Analysis
Posted by David Hinckley with help from Gemini on 18th Dec 2025
For advocates of sound money, the history of private currencies in the United States is a tale of two distinct eras. The first era ended in 2007 with the federal raid on the Liberty Dollar [1], a silver-based currency deemed illegal by the U.S. government. The second era started in 2019 with the Goldback, a gold-based currency that has successfully proliferated across multiple states.
To understand why one was seized as contraband while the other circulates openly, one must look at the specific federal statutes regarding "current money" and the crucial differences in design, intent, and legal framework.
The Liberty Dollar: Why It Was Declared Illegal
The Liberty Dollar was created in 1998 by Bernard von NotHaus and the group NORFED (National Organization for the Repeal of the Federal Reserve Act) [1]. It consisted of paper warehouse receipts and, critically, minted silver rounds (coins).
In 2011, von NotHaus was convicted of counterfeiting and conspiracy [2]. The Department of Justice went so far as to label the operation a "unique form of domestic terrorism" because it sought to undermine the U.S. dollar. The illegality of the Liberty Dollar boiled down to three fatal flaws:
1. Violation of 18 U.S.C. § 486
This is the "smoking gun" statute that doomed the Liberty Dollar. Federal law (18 U.S.C. § 486 [3]) explicitly prohibits any person from creating metal coins intended for use as "current money."
"Whoever, except as authorized by law, makes or utters or passes... shall be fined under this title or imprisoned..."
Because the Liberty Dollar produced metal rounds that were specifically marketed to function as circulating money to replace the U.S. dollar, they fell directly into the crosshairs of this statute.
2. Visual Similarity (Counterfeiting)
Prosecutors successfully argued that Liberty Dollars bore a "similitude" to U.S. coinage that could confuse the public. The coins featured:
- The dollar sign ($).
- The word "Dollar" (e.g., "$20 Silver Liberty").
- The phrase "Trust in God" (closely mimicking the federal "In God We Trust").
- The word "USA."
The jury found that these design choices proved an intent to pass the coins off as, or confuse them with, official U.S. currency.
3. Intent to Compete
NORFED explicitly stated their goal was to "repeal the Federal Reserve" and offer a competing currency system. In the eyes of the federal court, this moved the project from a novelty or collectible item into the realm of a criminal conspiracy to destabilize the nation's currency.
The Goldback: Why It Is Not Illegal
Goldbacks were designed specifically with the Liberty Dollar's legal defeat in mind. They are fractional gold notes (not coins) produced by a private company, Goldback Inc., and are currently circulating in states like Arizona, Florida, Nevada, New Hampshire, Oklahoma, South Dakota, Utah & Wyoming.
Goldbacks avoid federal prosecution by adhering to a completely different legal and physical structure.
1. The "Coin" Loophole (Avoiding 18 U.S.C. § 486)
The Goldback is not a coin. It is a gold-infused polymer note (a "foil"). Because 18 U.S.C. § 486 specifically outlaws private metal coins intended as money, the Goldback legally sidesteps this statute. There is no federal law explicitly banning the creation of gold notes or bullion in sheet form for barter.
2. Distinct Visual Identity
Goldbacks are designed to look nothing like U.S. federal currency (Federal Reserve Notes). To ensure there is no confusion:
- No "Dollar" Terminology: They are denominated in "Goldbacks" (e.g., "1 Goldback"), not dollars.
- No Dollar Sign ($): You will never see a "$" symbol on a Goldback.
- No Federal Mottos: They do not use "In God We Trust." Instead, they feature unique artwork and often religious or philosophical imagery distinct from U.S. coinage.
- Different Size and Feel: They are smaller or larger than U.S. bills depending on denomination and feel like polymer, not cotton-paper.
3. State Legal Tender Status (The "Specie" Laws)
Unlike the Liberty Dollar, which tried to fight the system from the outside, Goldbacks work within state laws. Several states (starting with Utah in 2011 [4]) passed Legal Tender Acts.
These laws recognize gold and silver specie (coin/bullion) as legal tender within that state. While Goldbacks are privately issued, they are recognized in these specific jurisdictions as "Voluntary Local Currency" or "Specie Legal Tender Instruments." This gives them a layer of legislative protection the Liberty Dollar never had. They are not trying to replace the dollar federally; they are operating as a voluntary barter instrument authorized by state law.
4. Voluntary Usage
Goldback Inc. markets the product strictly as a voluntary currency. No business is forced to accept them (unlike U.S. dollars, which are "legal tender for all debts public and private"). By framing the Goldback as a sale of gold bullion that can be used for barter if both parties agree, it functions legally as property trade rather than a counterfeiting operation.
Summary of Differences
| Feature | Liberty Dollar (Illegal) | Goldback (Legal) |
|---|---|---|
| Physical Form | Metal Coin (Violates 18 U.S.C. § 486) | Polymer/Gold Note (Not a coin) |
| Terminology | Used "Dollar" and "$" | Uses "Goldback" (No "$") |
| Motto | "Trust in God" (Mimicked US Coin) | Unique artwork/scripture |
| Legal Basis | Claimed constitutional right (rejected by courts) | Supported by State Legal Tender Acts |
| Intent | "Repeal the Fed" / Compete as current money | Voluntary local currency / Barter tool |